More than four years after enactment of the EB-5 Reform and Integrity Act of 2022 (RIA), United States Citizenship and Immigration Services (USCIS) has published a 358-page proposed regulation to administer the RIA. Most of the regulation straightforwardly embodies RIA provisions and interpretations that USCIS already had published in its Policy Manual and in its "EB-5 Questions and Answers" guidance. This alert focuses on provisions of the proposal that take new twists, the most important of which is a tentative plan to eliminate the currently prevalent use of EB-5 capital to replace bridge financing.
The Department of Homeland Security (DHS) invites comments at regulations.gov until August 31, 2026. A final regulation following comments will take effect 60 days after publication. With limited exceptions, changes in the regulations will not affect regional center applications or investor petitions filed prior to the effective date.
National Security and Fraud. Not surprisingly, USCIS asserts that RIA provisions empowering it to deny or revoke petitions, terminate conditional residence status, or terminate or debar entities and individuals based on national interest concerns, threats to public safety or national security, or predication on fraud or criminal misuse are retroactively applicable even to pre-RIA projects and investors. For example, USCIS has already been denying investor petitions based on the derivation of capital from communist-controlled interests. The statutory prohibition on federal court appeal of such denials (or revocations) makes this a "nuclear" issue. USCIS justifies this retroactivity stating that it would take action on pre-RIA conduct only if there was an ongoing threat to the national interest or fraud after RIA enactment.
Bridge Financing Off Limits. The biggest bombshell proposal is to eliminate job creation credit from the use of EB-5 capital to repay bridge financing. Many projects have used bridge equity or loans to get a project started while intending to repay such financing with EB-5 capital once raised, and this is popular with investors. USCIS says the impetus for the proposed limitation is the RIA's wording that the New Commercial Enterprise (NCE) must "benefit the United States economy by creating" the required jobs, stating that "Congress wanted to ensure a closer nexus between the alien's investment into the new commercial enterprise and resulting jobs." Nevertheless, recognizing that use of bridge financing can strengthen a project, USCIS invites comments instead to limit the duration or the proportionate percentage of bridge financing to be replaced by EB-5 capital. It is not clear whether the most restrictive proposal would actually prohibit replacement of bridge financing with EB-5 capital, especially if USCIS continues to allow EB-5 investors to take all the job credit arising from expenditure of all of the capital stack, and of course the most dangerous implication of the proposal is the implication that USCIS might limit job creation credits to the impacts of construction expenditures of EB-5 capital alone. For now, with only proposed regulations, investors can continue to invest in projects that properly replace bridge financing under current published policy, but they should make sure to file I-526/E before final regulations take effect.
RC I-956 Amendments. The proposal requires amendments to be filed 120 days before implementation of a change in RC name, structure, ownership, administration, or geographic area, including even the departure of an "involved person" who held a "significant role in the management or oversight" of the RC, or within 30 days (following an email to USCIS within five days) after the change under "exigent circumstances" which must be based on "significant, unanticipated disruptions to the operations" of the RC "that are outside the control of the RC and make prior notice impossible or impractical." Filing an amendment that adds a new involved person prohibits the RC from filing new project applications and puts any pending project applications on hold. Given the currently published normal processing time of 13.5 months, these requirements and interruptions are unreasonable and undermine the program.
Pre-RIA RC Amendments. A lawsuit overruled USCIS' initial position that the RIA invalidated all prior regional centers, and a court settlement provided that such RCs would need to file Form I-956 with evidence of RIA policies and by December 29, 2022. But then USCIS posted (and still has posted) an "Alert" stating "Dec. 29, 2022, is no longer the deadline to file Form I-956 … amendments, as required by the Behring Settlement. USCIS is extending this deadline until we publish guidance that clarifies the requirements of these forms." The proposed regulation (§ 204.411) states that any pre-RIA RC must properly file Form I-956 to show RIA compliance without mentioning any further delay. USCIS could consider this proposal (or the resulting final rule) to be the "published guidance" mentioned in the alert. Any pre-RIA RC that has not yet filed Form I-956 should consider doing so immediately while the filing fees are under $18,000 and before the proposed sponsorship interruptions from an amendment would take effect.
High Employment Area Implemented. The proposal for the first time implements statutory authority for USCIS not only to set lower investment levels for rural and high unemployment areas (HUAs) and infrastructure projects but also to set a higher amount for investment in a low unemployment area (which it calls a "high employment area" or HEA). It sets that amount at $1.4 million and applies it to a project located in "a census tract, or contiguous census tracts" in a metropolitan statistical area where the national average unemployment rate is 150 percent of the area. HUA analyses to qualify for the lower investment amount will need to include analysis of the project's actual census tract(s) to make sure the HEA problem is not triggered.
All Owners Involved. The RIA requires special vetting of persons "involved with" an RC, NCE, or Job-Creating Entity (JCE) (especially if "affiliated"). The statute defines involvement as having "substantive authority to make operational or managerial decisions over the pooling, securitization, investment, release, acceptance, or control or use" of any EB-5 capital under the RC program. The statute also says a person "may" include an owner, but the proposed regulation says any owner, including owners up a chain of entities, "is" involved and must be vetted with Form I-956F. This requirement becomes particularly problematic for an "affiliated JCE" having complex or changing ownership.
Promoter Registration and Disclosures. The proposal reverberates the teachings of a USCIS stakeholder meeting where it emphasized that all promotion must await I-956K registration (including submission of the promoter's written agreement with the issuer) by promoters and their employees who will interact with investors. The proposal allows promotion as soon as the promoter files I-956K without waiting on completed registration, but if USCIS denies registration the promoter must stop and the issuer must cease to use the promoter within 14 days of learning of the non-registration or of USCIS suspension or debarment of the promoter. The proposal does not mention whether an employee of the NCE who has filed Form I-956H (as part of a project application) must also register as a promoter using Form I-956K. The rule provides for the first time statutorily required USCIS guidelines for promoters, which contain obvious prohibitions on misleading but include a few specifics that may alter practices, including (1) that the promoter accurately represent the visa process, which the preamble says includes the length of time the process may take (apparently including waits for visa numbers) based on information made public by USCIS and the State Department and (2) that any prediction of financial returns or immigration outcomes be accompanied by meaningful cautionary statements which identify the material factors that could cause negative results. It is not clear whether general references to the PPM as a repository of risk disclosures will be deemed sufficient. The proposal is unclear whether the required disclosure of promoter compensation must be made by sharing with the investor the promoter's written agreement with the issuer (as is incorrectly stated in the preamble) or could be accomplished by a summary of the compensation or even by a disclosure in the PPM of the range of promoter compensation as is the current industry practice fostered by USCIS' responses to public comments to draft RIA forms in late 2022.
"Capital" Definition. The proposed rule disqualifies contributions of intangible assets like patents and trademarks that are deemed too hard to value, and capital held in a trust only if held in a revocable living trust of which the investor is both settlor and beneficiary with unrestricted access.
Full-Time Employment. In a change primarily affecting stand-alone investors, the proposed rule disqualifies not only combined part-time jobs (as before) but also job-sharing arrangements.
Partial Contribution of Capital. The proposal recognizes that the statute qualifies investors who have invested or are in the process of investing, defining this to include only commitment to invest the required capital no later than the date of admission as a conditional permanent resident. The proposal specifically recognizes the propriety of placing capital in escrow pending I-526/E approval, but it fails to address the common practice of committing to contribute proceeds of yet unliquidated assets. The rule incorporates the teaching of Matter of Hsiung concerning the contribution of a promissory note, requiring that the assets securing the note are owned by the investor, security interest of the NCE are perfected, and the assets are amenable to seizure and have adequate fair market value to cover the investment. The rule asserts that the required amount of capital to be invested in a high unemployment area is not locked in until the investor has made the full capital contribution, so that if a TEA designation expires before the final installment of capital and is not timely renewed the investor would be required to amend his or her petition to show investment of the standard amount instead.
Sustainment of Investment. The proposed rule reaffirms USCIS stated interpretation that post-RIA investors must sustain the investment for two years beginning when all of the required capital has been contributed to the new commercial enterprise and placed at risk under applicable requirements, including being made available to the job-creating entity.
Source of Funds Evidence. The proposed rule sets out an expansive list of required evidence, and recent experience shows an enhanced willingness of USCIS to jump straight to a notice of intent to deny or even an outright denial for failure to submit required evidence.
Separate Accounts. The RIA requires that EB-5 capital flow only through "separate accounts" that contain only the EB-5 investors' capital contributions. This facilitates tracking and auditing to avoid wrongdoing. The proposed rule requires that a project application must include evidence that the required accounts have been established (including bank statements) and that the fund administrator has been retained (unless waived). The rule does not address the currently frequent practice (repeatedly approved by USCIS without comment) of receiving both capital and administrative fees into one escrow account, from which they are then separated.
Fund Administration. The RIA provides that USCIS must waive the requirement of an independent fund administrator if the NCE "commissions an annual independent financial audit of such new commercial enterprise or job creating entity," but, in keeping with formal comments by this author, USCIS proposes to require audits of the NCE and JCE for the waiver to apply.
Sanctions. The regulation establishes a comprehensive system for progressively meaningful sanctions. Interestingly, an investor whose capital already has been invested for two years and whose job creation requirement has been met would not be negatively affected by a termination or debarment of relevant entities. The rule oddly requires a separate administrative appeal of each sanction, even if arising from the same circumstances. USCIS proposes a standard $10,000 penalty for failing to timely file a Form I-956G annual statement. The regulation handily recites the three situations mandating RC termination: redeployment violations, impeding a DHS audit, and failure to pay the annual Integrity Fee.
Job Creation Methodology. USCIS expects most projects will rely on U.S. Census Bureau American Community Survey (ACS) data and proposes to disallow the "Census Share methodology" blend of ACS and Department of Labor Local Area Unemployment Statistics (LAUS) data.
HUA TEA Validity Period. The RIA protects an investor who relies on a high unemployment area assessment when investing within the two years after a project application containing the assessment is filed (as long as it gets approved), but USCIS proposes automatically to extend the HUA validity period for two years from the date of I-956F approval.
Infrastructure Disclosures. USCIS extends the prohibitions from the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA) to prohibit EB-5 entities from divulging to investors "critical project specifics" unless explicitly authorized by the government agency administering the infrastructure project.
Regional Center Areas. USCIS proposes to interpret the RIA's "contiguous and limited area" requirement for the area of a regional center to areas sharing a common boundary or at least one common point when using legal boundaries recognized or established by the U.S. Census Bureau, including boundaries of a state, territory, county, and census tract. This is designed to disqualify areas that span, for instance, California and Hawaii, Puerto Rico and Florida, or Puerto Rico and the U.S. Virgin Islands, despite economic linkages, but would allow designation of the State of Hawaii or the Commonwealth of the Northern Mariana Islands (CNMI). USCIS also would require that the proposed economic activity of the RC have a substantive economic impact on the entirety of the proposed area, which could revive some approaches that applicants have seen in RFEs but have overcome so far.
Project Application Amendments and Revocations. USCIS proposes for the first time parameters for the requirement of an I-956F amendment. Predictably, USCIS requires an amendment within 30 days of a change that may impact investor eligibility, including a change of ownership of the NCE or (affiliated?) JCE, a change of location, a reduction in expenditures, or a change of financing sources, which may cause a hold on investor petition adjudication pending a decision. Amendment is also required for a change of separate accounts or escrow arrangements. Although USCIS recently published policy that HUA renewals could be accomplished by email to initial public offering (IPO) rather than I-956F amendments, the proposed rule also sensibly requires an amendment "at least 90 days prior" to the first I-829 eligibility date for a project's investors, providing evidence of how the capital actually was spent and the jobs created, allowing each investor's I-829 to refer to the project amendment and avoid submitting the same voluminous evidence about the project. If not enough jobs have been created for all the NCE's investors, USCIS will approve petitions for the number of jobs established and allocate them either according to the NCE's agreed formula or "based on the filing date of the EB-5 immigrant visa petition" (which seems to be a mistaken variation from the prior policy default to the order of I-829 filing), and the NCE will need to submit further amendments to establish further job creation to support future I-829 filings. USCIS sets out a process for revoking project approvals based on past errors, changed circumstances, etc.
Regional Center Terminations. The RIA mercifully allows investors whose RC gets terminated to benefit from the NCE's association with another RC, and USCIS proposes to require the new RC to file a project amendment and then for the investors to file amendments to their I-526E petitions.
Redeployment of Capital. Given the meaningful reduction in the time investors must sustain their investment, required redeployment of capital repaid from the JCE to the NCE will be rare, but the RIA sets "parameters" for it and requires USCIS to issue regulations. The proposal essentially rehearses the statute but adds (1) an implication that a project application amendment may be appropriate given that the capital was supposed to be "expected to remain invested for not less than two years" and (2) that the redeployment should be made within three months of the repayment to the NCE unless a longer period was shown to be reasonable in the "totality of the circumstances."
I-526/E Withdrawal Implications. USCIS uses this opportunity to relieve itself of a former strained interpretation of a regulation meant to protect sponsored employees from some implications of their employers' predatory withdrawal of I-140 immigrant petitions when the employees could "port" to another employer. Now USCIS acknowledgement of I-526/E withdrawals will automatically revoke the petition without confusing limiting words.
Standalone Investors. The RIA set an expiration date for the regional center program of September 30, 2027, and "grandfathers" only investors who file I-526E before September 30, 2026. With hope, Congress will extend both dates soon. Meanwhile, as of September 30, 2026, in the absence of legislation, investors will start considering use of the "standalone" investments that do not expire. Only one standalone EB-5 investor may invest in any NCE or project, which does not need a regional center sponsor and does not need to comply with the complex rules of pooled projects. A standalone investor petition must show the sources of all capital invested in the NCE, including capital from non-EB-5 sources. Only full-time operational jobs may count – no indirect or induced jobs of any kind.
Troubled Business Prong Eliminated. USCIS proposes to eliminate the prior regulation's alternative path for showing job creation through showing that the relevant business had lost net worth during the prior year or two and that the investment "saved" jobs that might have been lost. This path was rarely used and was not grounded in the statute.
Our Immigration Team is prepared and well-equipped to guide, assist, and represent employers through this process. If you have any questions or would like more information, please contact a member of Baker Donelson's Immigration Team.